Week of February 24, 2025
Dec Mullarkey, CFA, Managing Director, Investment Strategy and Asset Allocation
U.S. tariff speculation continues. The only thing certain right now is an extra 10% on imports from China. Tariffs would most likely continue to strengthen the U.S. dollar, simply because tariff targeted countries would look to weaken their currencies to keep exports more competitive. However, the current administration says it wants a weaker dollar. But a strong economy and a U.S. Federal Reserve on hold are mightily at odds with that. If you are a growth leader and offering higher rates, it is natural global investors would want to hold your currency.
In today’s world, the U.S. would need cooperation from other countries to orchestrate a dollar devaluation. However, the administration appears to be taking cues from the 1985 Plaza Accord. Back then, the U.S. teamed up with other countries, Germany and Japan in particular, and got them to stimulate their economies to buy more U.S. products. In return, the U.S. agreed to more fiscal discipline to reduce its deficit. Within two years it had worked out favorably for the U.S., but less so for Japan. The latter’s strong currency ignited an asset bubble that didn’t end well.
Today’s world has changed. Goverments and central banks prefer to avoid heavy currency intervention outside of any peg with the dollar. There is also a larger number of sophisticated economies than in 1985, so negotiations would be complicated. And any goodwill would likely only come from allies, whose enthusiasm may be blunted by tariff threats. A weak dollar seems like a tough assignment unless the economy hits some speed bumps and the Fed cuts rates. After all, currency exchange rates are just a scorecard of underlying relative strength in growth, trade and rate levels. So, if you want to change the score you have to change some of the drivers, as it is much harder to ask for favors now.
Sources: Bloomberg, Financial Times, 2025.
Andrew Kleeman, Senior Managing Director, Co-Head of Private Fixed Income
Nadeem Hemraj, CPA, CFA, Associate Director, Private Fixed Income
The 2025 Miami Private Placement Conference broke another attendance record, signaling strong momentum for the year ahead. The investment grade (IG) private credit market continues to build on 2024’s record $125 billion in issuances (2023: $91 billion), reflecting sustained demand.
A growing number of issuers, including non-domestic companies, are exploring the IG private credit market for long-term financing solutions. The range of financing opportunities is as broad as ever. However, navigating the IG private credit market will require investors to be increasingly selective and nimble, while maintaining a very disciplined investment approach. More issuers coming to the market also means greater attention needs to be paid to deal terms and other critical issues.
In infrastructure debt investing, major themes include energy transition, midstream and digital infrastructure. Data centers are seeing significant capital needs, prompting issuers to tap IG private credit alongside the existing floating rate and asset-backed securities markets. Structured credit deals, or asset-backed finance, are growing in the private sector in both new assets (such as in commercial property assessed clean energy [CPACE] and fund finance structures) and in more traditional underlying assets. On deal structures, issuers are expected to keep testing the market’s flexibility on pricing and covenants. This is happening all in the context of a growing buy-side market, which is driven by the increasing appetite of traditional institutional players but also by the expanding role of private credit funds.
Sources: Private Placements Industry Forum, Private Placement Monitor, 2025.
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